The BUFFS Show
The BUFFS Show
Why Building Your Dream Home Could Be Your Biggest Mistake
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Building sounds perfect on paper. Total customization. Brand new everything. A home designed exactly how you want it. But the reality can look very different once you factor in timelines, costs, decision fatigue, and unexpected challenges along the way.
Welcome to the Buff Show, a show brought to you by Mountain Buff Real Estate. We are dedicated to chasing down the buffs of the world and bringing their expertise right to you. So here's why building your dream home might be a$500,000 mistake. All right, guys. Welcome to the buff show. Today we're going to cover an interesting topic topic that I've been it's been in the back of my head for a while. Buying existing versus building. Yeah. And this is a good one for Kate, actually, because you're just saying you're going to buy a lot and build. Want to.
SPEAKER_01So yeah. Obviously, we've we've always wanted to build. We've always wanted to build kind of our forever home. Kind of, yeah. I mean, obviously. I think everybody does, right? I think everybody has. What does a forever home even mean? It never is. Yeah. You know what I mean? Like it's never, I mean, I say never. Some people, I know some people who've been there for 50 years or more. But but um I think it's it's it's something that entices everybody. Um, like, hey, like I'd love to be able to build my house. That's yeah, I'm the first one and the only one that's ever lived in it. One, two, I can, you know, set it up however I want, right? Whatever makes sense. Most for me and my family in our situation, whatever. But the hard thing that comes with building, and obviously this is done with just my experience with real estate, also my own like research. It's expensive. Yeah. And it's always gonna be more expensive than you think.
SPEAKER_00Yeah.
SPEAKER_01Always.
SPEAKER_00So we're gonna kind of dive into the pros and cons of buying existing versus building and like some things to keep in mind. Because I'm I'm having this conversation a lot. People are like, man, like I like this house, and we have some examples. I like this house. It doesn't check all the boxes, but it's pretty close, and this is the price tag. Um, or do I just go out and build? And I'm like, okay, well, the difference is like a lot of money. Right. And and we'll run through some scenarios. But I think what's happened in the market that people don't realize. So, like we have we have a few examples here, like this house was built in 2001. When was that one? 2018. 2018. I would say anything like 2018 is probably like the sweet spot and older. Like sellers that built those properties, their basis into those homes are like cheap.
SPEAKER_01Yeah.
SPEAKER_00Um, not because it was cheap to like they used cheap material, just because it was cheaper to build then. The land that they bought was cheaper, uh, concrete, framing, wood, um, all the materials, labor, everything was so much cheaper back then. Because what happened is we had COVID hit, and then we had all the supply chain issues, and now we have the tariffs, and everything like skyrocketed with price. Inflation was a huge thing too. They pumped trillions of dollars back into the system. Every American got, what was it, like a thousand bucks or something like that? 1200 bucks. And that when you do that, you devalue the dollar. So everything just got more expensive because inflation really. Yeah. And then the second businesses and people raise their prices, it's so much harder for like if they see people are still paying those prices, they're not just gonna be like, well, let me lower them, you know? And so I think we've had all those price hikes to the point where now it's like, and and we were talking about this earlier today. Like, I I have people come to me quite a bit and they're like, hey, I think I want to buy a lot and build, could probably build for like under 200 bucks a square foot. And it's like, like, unless you're doing like all the stuff yourself, I don't know how that's possible in today's market right now. Right. Right. Um do you get that a lot?
SPEAKER_01Well, I just actually just had this conversation with a client of mine. They they built new with a builder, yeah. Um, with like a bigger builder, right?
SPEAKER_00So almost like a spec builder kind of basically, yeah.
SPEAKER_01They came in, they could change a couple of things here and there. But and that's a whole different podcast. Yeah. But um, they built that, they want to sell that, they want to buy a piece of land and then build new. Like a custom. Custom home. Yeah. A home that where their their goal is to just to get back up into Morgan. Yeah. That's like the number one goal. And so they're maybe open to buying existing, but their their ideal is that they get to build a custom home with what they want. Yeah. And so we went and walked a house that they really liked. It's an existing home, it's currently on on the market. They liked the floor plan, they liked the finishes of it. Um, and really we went and walked it just to kind of see what do you guys think? One, do you like it too? And what's the floor plan, the finishes? Like, compare this to a custom home, right? Yeah that you're gonna build. Yeah. Anyways, so they are, and I'm hoping they're right. You know, I'm hoping that they're right because if they are, I'm gonna sell my house tomorrow and and build. But they are under the impression that they can build for$150 a square foot. I told them, I think you're probably realistically gonna be anywhere. And now these guys aren't building like a super high-end custom high-end finishes type property, but it's gonna be an eight, nine hundred million dollar house when you get in the house and the land. I told them you're gonna be$250 to$300 a square foot. And so what we did with them is where we actually, I got them a whole bunch of information on the home that that we walked and had having them take that to a builder, a contractor, and get legitimate bids. Yeah. That's the only way to really figure out what you're gonna pay price per square foot to help them decide like, are we gonna build or are we not? But even when we ran the numbers based off of lots that were currently for sale in that area, and based off of a hundred and I mean, I can do the numbers really quick. So that specific house was listed at 850, 850,000. It was 3,500 square feet, roughly, I think. The lots there were 20 were two two 266,000 dollars. Oh yeah. Times in that by 150. Wait, no, sorry, hang on, hang on. So two so thirty five hundred times by one fifty, yeah, puts them at five hundred and twenty-five thousand plus two hundred and sixty-six thousand, puts them at seven hundred eighty-five. So even building at a hundred and fifty dollars a square foot, right, they're only saving sixty-five thousand dollars.
SPEAKER_00Right. That's which I I have not heard of anybody building under 200. Exactly.
SPEAKER_01And so that's lately. Yeah, and so that's obviously that's the conversation I'm having with these guys is yes, if you can build for$150 a square foot, you're dumb not to. It's gonna save you money. Question is, is I don't think you can actually build for this.
SPEAKER_00No, I don't think that's maybe materials. Yeah. Um, yeah, no, I've had this conversation a lot. I was um meeting with some clients and they're wanting to build an Eden. Um, and it's so weird because the the price to build, like say in Eden or Morgan, it goes up quite a bit versus in Ogden or and I think we we ought to clear, because if you're if you're looking at we're not talking about um track home builders, um like Nilsson Ivory, Symphony, um, all these all these builders that just they build a ton of homes at once. They buy the land. They actually there's actually some really good deals with those builders right now because they're building the same plan over and over and over again. They got it dialed. They're they're like bulk ordering all the lumber and all the materials, and then they got the subs. Like subs are giving them deals because they're gonna deals. So, like that that is not custom. We're talking about being like one off piece of land. I want this, I want to build this plan. Like, and anytime you do that, you're taking a builder that's never built that plan before. Correct. And they have to kind of work backwards to try and figure it out and make it all happen together. Same with the subs, the architects, like all that. It just takes more time. And a lot of these homes, if you're building custom, most of the time it's gonna not be like I'm if you build in Eden, like you're dealing with like geotech studies and you're on a hill, and how are you gonna keep the house from sliding off the hill? So I was in a meeting with a client and he's like, I really want to build in this area. And it was kind of up in Wolf Creek by the golf course. And I was like, well, let's call the builder and just see. I had some builders, we called them, and he's like, and he's built like three or four homes in that area. Like, hey, what what are you to build? Like just base. Give me a base. And he's like, I was like, think you could be under 500 bucks a square foot. He's like, no. He's like, maybe 525, 550 if we're being conservative. And that was for like a 3,000 square foot house. So like a one a$1.5 million build job, not including the lot. Or the land or the landscaping. Yep. And so then um like I those people, we we start looking at other options. Like it, it's just it there really is such a huge gap between building exactly what you want. And the pros are you get exactly what you want. You get you can maximize on on the the views and the bedrooms and the bathrooms and how you want it, and it's brand new and all these things, you can really maximize on that. But there is a lot of money. It's I mean, it's comparable to going out and buying like a brand new car right now. You drive it off the lot. If you were to go and try and sell that truck the next day, like it's gonna drop in value because you it's now used, right? Right. Luckily, real estate um tends to go up over time, but I think some of these houses are gonna take a minute to catch up with um our market right now because there is such a huge gap between people that built, say, 10 years ago and people that are building right now. And I think eventually all these 10-year-ago houses are gonna sell and there's not gonna be that many of them, and then the new price is just gonna be the new price to build. Like it'll be kind of similar and there won't be as big of a gap. I think with how crazy inflation was, um, it it created this gap. But as the properties get sold off, I think that gap's gonna like come back more to normal. Yeah. Because it it didn't, it hasn't always seemed like it was like this big of a gap to try and build versus buying existing. If that makes sense.
SPEAKER_01I, you know, I yeah, I I there's definitely been times I'm I'm sure of it that where it was almost more cost effective to build than it was to buy existing.
SPEAKER_00Yeah. Um shall we run through an example? That's it. So I printed off a sheet, I've shown this house a few times. This is in Huntsville.
SPEAKER_01Um what tell me what like some of the stacks like this one was listed at 2.2, so$2,260,000. Okay. It was sold. Well, let's see. It was listed at$461 a square foot. It is current, it's four thousand eight hundred and ninety-five square feet, seven bed, four-bath, um, three acres, yeah, four-car garage built in 2018.
SPEAKER_00It's got a pool. Got a pool, it's fully finished, like it's it's a sweet house, and it even has a pool and a barn, like a horse barn. And then it's fully fenced, it's got irrigation um on it, and 2.2. So I've taken some buyers through this and we've looked at it, and I'm like, and it's crazy, it's been on the market for like 60 days now almost. Um like if we work backwards, we're like, okay, what would it take to replace this? So land, you're probably about 600 grand for three acres. Oh, listen. Okay.
SPEAKER_01Um you got a 20 by 40 barn. Barn.
SPEAKER_00Let's say a hundred grand for that. A pool and your landscaping. What do you think? For three how much of it's landscaped? Is it all three acres landscaped or like what's the right thing? Well, you're fencing all the way around. Uh let's say 150 for pool and landscaping. And I think we're being I'd be pretty low end, yeah. Yeah. Okay. Um and then the house. If you were to build it at even 300 on the low end. Well, let's say 350, that puts you at 1.7 million. And we didn't do any like site work or any of that other stuff, but what does that put you at? 2.55. 2.55. Which again, I think 350, it would be a stretch to try and replace this and build that for that. Um, so there's a there's a big gap. And like they've been on the market, there might be some flexibility here. So this is really a good example. Like, even right off the top, there's like a$250,000,$300,000 swing on that. And we were pretty conservative on our numbers. Yeah.
SPEAKER_01I mean, to landscape even an acre, you're gonna be with a pool and just the fencing around the whole three acres is I mean, the fencing alone is probably$50,000 or more. Yeah.
SPEAKER_00Well, and that lot is probably worth more than$600 with irrigation and everything on it. There was one that just sold and it sold for over$600. So the the moral of the story is you can get some pretty sweet deals right now. And it's like the house that we bought, um, it was listed for like mid-nines or something like that, and it's on three acres. And I'm like, geez, a three-acre lot is worth five to six hundred right now. And so that was like a huge, I'm like the shell of the house, like it's it's 4,000 square feet. Like the shell is worth 300,000. Yeah.
SPEAKER_01And you got like you're gonna look at these listings and go, well, this one is you know$461 a square foot. Like that's higher than what we were talking about, but this that includes the land. Yeah. And that's one thing I think people don't quite take into consideration as much. Cause if you were to take that same number that 2.55 and divide it by the square footage of the property, we're$520 a square foot to build that. It that would include the land. So um it's just expensive.
SPEAKER_00Yeah, I have another one that I'm working with some clients on right now up in Cache County. 4,000 square foot house. They're asking$1.2 million. It's got a big, massive shop, like heated. It's got tin all around the inside, big doors, lights. It's got parking, fencing all around. They have an arena, a horse barn, like a loafing shed, a hay storage shed, landscaping. So they're at$295 a foot, uh, 2.14 acres. And I'm just like, geez, like you could not replace this for that price. It's it's unreal. So there, I I think there's some great deals. Uh what do you think after diving into this? Does this make you want to go out and build?
SPEAKER_01I mean, yes. Like I I still do, right? But the the question is, is can you afford to do it? Right. I think if if you can afford to do it and you can get what you want, then I still think it's a great option. But with that being said, it's not a great option, even if you can afford it if you don't plan on being there for very long.
SPEAKER_00Well, I don't know though, because I was just gonna say there's a few people that I know, but most of them are in the trades.
SPEAKER_01Like they differ because you're able to do the work, save money, or you can buddy buddy with, you know, you have a plumber friend and an HVAC friend and a framer friend, and you'll come because I have a I have a a buddy who built a home, bought a lot. This was before things got crazy expensive, but bought a third of an acre lot for 90 grand, built the house all in 300,000, including the land. Yeah. All in that home easily could sell for 700.
SPEAKER_00Yeah. Yeah.
SPEAKER_01So obviously that's a different story, but if you're able to go in and do all the work, then that's gonna save you a lot of money. And obviously, then it's probably more cost effective to build, right? But if if if you're not doing any of the work and you're paying contractors and subs to do everything, and you're only planning on being there for a year or two, I think you'll have a hard time getting your money. I agree, I agree with that.
SPEAKER_00Yeah. If you don't have like an inn, you're not a contractor, like contracting it yourself, it can get pretty expensive. Um has been done though.
SPEAKER_01Some people have built some pretty inaugural spots. But for example, I have a client looking up in a development somewhere that share yet. Anyways, I got a client looking up there and we're running through all kinds of different scenarios. Now he's planning on being there for this is kind of like his retirement, his like forever type home, right? Um but he right now is the very first person kind of looking into this development. And we've gone up there and we've walked the development a couple of times and he's really loving it, but he's there's some there's a lot of risk there. Yeah. Right. Being the first, I know that he can get a decent deal, right? Deal on being the first, right? They they want to get things moving, they want to get lots sold to you know, just keep people interested in it. Um, but being the first, you're taking a risk on what the properties are actually worth. Right. Um, they don't know what they're actually worth. We're pulling comps and we're comparing properties, but the hard thing is is this is such a a specific, unique type development that there's really not good comps. And so we're pulling numbers and we're kind of just rolling the dice a little bit here, and they know that, and you know, they might be all right with that. But um you could take risk because I've seen other developments where the first people in their sell price on the land, say 400,000, but those lots now are selling for 250 because they're just not moving. Yeah, I've seen that too. And so, you know, at the start, just on the land, you're uh you're under$150,000. Yeah. And that's a risk that you take. Yeah. So and obviously this is with a development rather than going and buying one parcel and some undeveloped, I don't know.
SPEAKER_00So I I think it's just something to like consider. Um if you're after something super unique and like there, there is, I mean, that there's a lot to be said of just like building exactly what you want, getting exactly how you what what you want, and like going through that process. Um, I I have not done it yet. Um, I've watched my parents do it a number of times, and I think it's a very proud, like, we built this with our hands, we did this. Like it's a pretty cool spot experience. And I I anticipate eventually one day I will do it just to get it exactly how I want. It's new, there's no maintenance stuff. Because the other, the the other thing that we could start talking about here is like, okay, well, these houses are older. Like that house I was talking about in Cash Valley, it was built in 2001. Like it's gonna need a new roof, furnace, water heater. Like, there's things you're gonna have to invest into it. And same with this house, like it's already got you know eight years on it. You're almost 10, so yeah, so furnace AC stuff is gonna be going heaters. Yep. So there's stuff that you'll have to have to do. But I think overall, if we were to make a just a general statement, existing homes are cheaper in general than building a custom home right out of the gate. However, you don't get exactly what you want. Um, and if you have a really cool, unique lot in a really cool, unique location, like like you can build on it and create something super special and unique that you could maybe sell it and profit from it, you know, yeah, down the road. But you just have to be aware of like what you're building, where you're building it, what are the other homes selling for in that area, and then be realistic on what your build time and cost is going to be because I don't meet people very often where they're like, my build was faster than I expected and cheaper than uh we budgeted for. It's always like we're, you know, 10, 15% over budget here.
SPEAKER_01I mean, I on my own, I've gotten a couple bids on a build, and we're budgeting an extra hundred thousand dollars for that build. And I had a buddy who just built and they did they did a ton of the work on their own. I mean, he was$25,000 before he even poured concrete. And that's just in plans and connection fees and utility fees and city fees, and like it was just he was$25,000 before you could even start building.
SPEAKER_00I was talking to somebody the other day in their friend's building and they're like$400,000 over budget already. Yeah. So it's crazy. And then there's risk. Like if you don't have enough cash down, like you don't know what rates are gonna do. So like in this rate environment, like last month we were in the fives. Now we're in like almost pushing seven. So like it fluctuates that much when you go to lock that final rate. Like, if you're cutting it close on what you can afford, there can there can be some risk there. So you just have to be careful. Um, but I just I've been having this conversation a lot. I thought it'd be helpful. Um I do plan on building eventually one day. I think there's a time and the season for it, and there's a lot of opportunity. I have a lot of builder friends that they just like every two years, they're like build, sell, build, sell, build, sell, but they're and they're able to do it for a lot cheaper because of their their that's the that is what they do.
SPEAKER_01Maybe what I'll do is I'll get the the bids from my clients that are currently working on getting bids on that existing home.
SPEAKER_00Yeah.
SPEAKER_01And we'll compare what that home sells for. Versus oh, that'd be really cool. What they actually got their actual bids for.
SPEAKER_00I think it's cool that you took like almost the same the same um plan and everything, and you're like, what would this take to replicate this?
SPEAKER_01Yeah. That's cool.
SPEAKER_00Yeah. So well thanks for watching guys.